Posts Tagged ‘M&A’

Multi-billion dollar, multi-national Amdocs has signed a definitive agreement to acquire media service provider Vubiquity.

The $224 million cash deal has been approved by both the Boards of Directors of Vubiquity and Amdocs, and is expected to close during the second quarter of FY2018.

Amdocs (NASDAQ: DOX) is a provider customer service software to communications and media customers such as OSS (operational support systems) and BSS (business support systems) systems. This acquisition is a significant expansion into the media industry for Amdocs, who did not have a booth at this past IBC and does not have a booth at this upcoming NAB Show (at the time of this writing).

Amdocs had already started to move deeper into the media technology sector with its September 2016 acquisition of Vindicia, a provider of subscription and payment solutions. Vindicia’s payment solutions support several digital offers such as the BBC & iTV Britbox service and NBA League Pass. Amdocs purchased Vindicia for $90M.

This acquisition is a much further move into the media supply chain. Vubiquity is a managed service provider connecting content owners and publishers with video distributors – both traditional PayTV operators and OTT publishers. In its collateral Vubiquity cites relationships with over 650 premium content producers (film studios, television networks, etc …) and over 1,000 global video distributors (PayTV operators, OTT publishers, etc …).

Vubiquity had raised a total of $237.2 million over four rounds of funding between 2007 and 2012. Current private equity owners include Columbia Capital and The Carlyle Group, whom invested $100 million of new funding as part of the Company’s purchase of SeaChange’s On Demand Group in 2012.

A series of M&A transactions built Vubiquity, beginning with the 2009 merger of Avail Media and TVN Entertainment – subsequently “Avail-TVN.” Avail-TVN rebranded as Vubiquity in early 2013.

Later in 2013, Darcy Antonellis, then Warner Bros. CTO, joined Vubiquity as CEO. Darcy’s notable resume also includes two speaking appearances at Devoncroft’s annual Media Technology Business Summit (see photo on left). At the closing of the transaction Darcy will join Amdcos as head of the Amdocs Media Division.

More recent deals for the DETE (Digital-End-to-End) service from the Warner Bros. Technical Operations and Juice Worldwide, a digital supply chain solution company, further expanded Vubiquity’s portfolio.

The press release announcing the transaction states the “impact of the acquisition on Amdocs’ diluted non-GAAP earnings per share is expected to be neutral in fiscal year 2018, and accretive thereafter.” Since this is a cash transaction, it is difficult to derive any meaningful view on deal multiples from that statement. However, Amdocs offered greater detail during its earnings call with analysts.

Tamar Rapaport-Dagim, CFO Amdocs, indicated an expectation of Vubiquity to contribute “approximately $100 million in the first 12 months after closing.” Ms. Rapaport-Dagim continued, “Vubiquity, as you can understand from the message that we think it will be a neutral impact on EPS in fiscal 2018 it’s coming with a low margin to start with. And we believe we can build it up along the time quite quickly, given both the top-line synergies and the cost structure synergies we see in front as opportunities.”

Using expected revenue contribution as a proxy for annual revenue suggests a deal multiple of 2.2x sales.

The stated level of revenue contribution contrasts with several earlier public data points on Vubiquity’s annual sales. At the time of its rebrand, Management gave public guidance of annual revenue in excess of $250 million. Also, the inc5000 lists Vubiquity’s annual revenue in 2013 at $296.8 million. Some caution is appropriate in concluding revenue has meaningfully decreased since Vubiquity’s business model may have passed thru content licensing revenue. Such mechanisms or accounting treatment could result in materially different statements on revenue, depending on the context of the statement.

All communications by Amdocs cited a view of convergence between communications and media & entertainment. “Investing in the growth engines of tomorrow is a core discipline of Amdocs and we see considerable opportunity resulting from the increased convergence of communications with media and entertainment” stated Eli Gelman, CEO Amdocs.

Mr. Gelman provided further commentary on the rationale during Amdocs earnings call with analysts.

“…we see increasing convergence between traditional wireless and Pay TV distributors, content owners and large OTT players. By acquiring Vubiquity, we believe Amdocs will be uniquely positioned to address the requirements of distributors, content owners and web players as the lines between each become increasingly blurred.

Second, media and entertainment companies like Disney, HBO and Time Warner are reaching out directly to the end users with a direct content-to-consumer business model or what is called D2C direct-to-consumer. This trend requires new systems to support an improved customer experience that we believe Amdocs is well-positioned to provide.”

Telestream announced that it has agreed to acquire IneoQuest, a provider of quality control and analytics solutions for broadcast and network providers. The closing of the transaction remains subject to customary conditions and is expected to occur toward the end of the month.

The terms of the deal were not disclosed. IneoQuest last publicly disclosed revenue in 2011 (as part of the Inc. 5000), when annual revenue was just below $40 million. An interview of IneoQuest’s CEO Calvin Harrison, by CEOCFO magazine in April 2013, quoted Calvin as projecting “double digit growth again this year.” There has been no subsequent guidance on revenue performance by IneoQuest.

Commenting on the transaction, Calvin stated, “We are happy to be joining the Telestream family and are looking forward to seeing our technology contribute to Telestream’s next phase of growth.”

As part of the press release announcing the acquisition, Telestream management focused on how IneoQuest expands Telestream’s existing capabilities in quality control and monitoring. “When it comes to media processing and delivery, the Telestream brand has become synonymous with quality. With the addition of IneoQuest technology to our existing QC capabilities, our customers will have the ability to monitor quality at any point in the delivery pipeline, making diagnosing and correcting a problem easier than ever before” explained Dan Castles Telestream’s CEO.

UK-based Vislink plc, which owns broadcast industry brands Advent, Link, MRC Gigawave, and Pebble Beach, announced results for the first half of 2016. 1H 2016 revenue was £22.6 million, a decline of 15% versus the first half of 2015.

Vislink was anticipating challenging results for the first half of 2016 having published a negative trading update on July 6, 2016. The trading update warned sales in Vislink’s Communication System (“VCS”) business were below management expectations. In addition, the July update indicated the further restructuring of VCS would necessitate a non-cash write-off of £6 – £9 million and additional annual cost reductions of £1 – £2 million. This adds to last year’s restructuring of the division when headcount was decreased 26% and a £2.5 million charge was incurred.

The underperformance of VCS caused Vislink to consume its entire banking facility and will subsequently force Vislink to breach its debt covenants. Once Vislink is officially out of compliance with its financing arrangements, the Company’s bankers may call for repayment of existing loans – which Vislink does not have the cash to repay. While this represents a material uncertainty for the Company, Management did indicate it is engaged in constructive discussions with its bankers.

In order to improve cash generation, Vislink’s management is canceling the Company’s dividend until debt drop below EBITDA, canceling its equity incentive program for senior management, and will “continue to examine the appropriateness of the Board and Group structure.”

The announcement has resulted in a greater than 50% decline in Vislink’s stock price decline from close on September 29, 2016. Measured against Vislink’s 52 week stock price, the decline is greater than 75%.

Net loss for the first half of 2016 was £32.2 million or 26.9p per share, compared to a net loss of £0.9 million or 0.4p per share in the year-earlier period.

1H 2016 operating loss was £32.0 million versus an operating loss of £0.8 million during 1H 2015. Operating losses included non-cash write downs of £23.3 million for goodwill and acquired intangibles as well as a write-down of £6.3 million of inventory and capitalized development costs.

A majority of Vislink’s goodwill write-down was associated with the Broadcast division (excluding Pebble Beach). The entire £20.6 million of goodwill for Vislink’s Broadcast division was written down.

Given the magnitude of the non-cash items it is informative to review operating cash flow for the period. During the first six months of 2016 operating cash usage was £1.2 million, compared to generation of £0.8 million during the first half of 2016.

The results for the first half benefited from a positive £2.2 million foreign currency translation based on a weaker GBP.

Broadcast Performance:

Vislink’s broadcast revenue for the first half of 2016 was £20.6 million, a 7.6% decrease versus broadcast revenue in 1H 2015. The decline was primarily related to an 18.5% year-over-year drop in the revenue of Vislink’s Communication Systems (“VCS”) business.

Management attributed the decline in VCS to a combination of a general pause in spending ahead of the adoption of next-generation technologies and a reduction in spend from broadcasters driven by a diversion of budgets from infrastructure to investing in content.

Pebble Beach revenue for 1H 2016 was £5.4 million, a slight decrease of 1.4% when compared to the first half of 2015. In the commentary accompanying the earnings release, the Company highlighted a 53.3% growth in Pebble Beach’s order book to £5.4 million during the 1H 2016 (1H 2015: £3.5 million).

Revenue by Region:

Revenue from the UK & Europe region was £7.6 million during the first half of the year, an increase of 20.1% over the first half of 2015. The UK & Europe represented 33.6% of total revenue for the first six months of the year, versus 23.7% in the same period of 2015.

Revenues from the Americas were £7.9 million, a 27.4% decrease against 1H 2015. On a percentage basis, Americas was 35% of total revenue for the first half of 2016, down from 40.6% in 1H 2015.

First half 2016 revenue from the Middle East and Africa (MEA) was £3.2 million, down 3.2% versus 1H 2015. The MEA region represented 14.2% of revenue in 1H 2016, up from 12.4% during the first half of 2015.

APAC revenue in 1H 2016 was £1.9 million, up 4.1% versus the comparable 2015 period. APAC revenue was 8.4% of total revenue in 1H 2016, up from 7.1% in 1H 2015.

Operating Expenses by Function:

R&D expenses recognized in 1H 2016 were £3.6 million, a 29.5% increase over 1H 2015. As a percentage of revenue, R&D expense was 16.1%, a substantial increase from the 10.6% in 1H 2015. During the first half, Vislink wrote down £0.8 million of capitalized R&D investment. Management did not identify the associated products or technologies associated with the write down.

Sales and marketing (S&M) expenses were £4.6 million, a slight rise of 1.4% against 1H 2015 S&M expense level. On a percentage basis S&M was 20.2%, an increase over the 17.0% of revenue from 1H 2015.

Administrative expenses were £2.9 million, a decrease of 28% versus the first half of 2015.

Cash and Debt Levels:

Vislink had a cash balance of £3.1 on June 30, 2016, down from £3.2 at the end of 2015. During the same time period, the Company’s debt balance increased to £12.0 million from £9.0 at the end of 2015. These developments have increased Vislink’s net debt to £8.8 million. This compares to net debt levels of £5.7 million at 2015 year end and £1.2 million at the end of the first half of 2015.

In the release Management indicted debt has increased further since the end of the June and Vislink is now using its entire Revolving Credit Facility of £15.0 million.

Business Outlook:

Vislink’s order book at June 30, 2016 was £11.4 million, an increase of 60.5% over the same date last year.

In their prepared remarks Management discussed the organic growth of Pebble Beach, its pipeline of software bolt-on acquisitions, and its continued focus growing Vislink’s software business. The below slide is taken from the Vislink’s presentation on the first half results.

“We continue to see significant underlying organic growth in our software business with a strong order intake which has carried through into H2. The long term prospects for Pebble Beach Systems continue to improve as we augment our core enterprise software solutions with cloud enabled software applications. We also have a pipeline of partners and software bolt-on acquisitions which will further enhance the Group strategy of building a high margin, cash generative software business” said John Hawkins Executive Chairman of Vislink.

In 2013 Conax had revenue of $103.7m, and EBITDA of $40.2m. In 2012 Conax had revenue of $96.1m and net income of $22.8m.

Kudelski, through its subsidiary Nagra, is one of the industry’s leading conditional access providers. The company also owns pay TV middleware provider OpenTV, which it acquired from Liberty Media.

Buying Conax gives Kudelski another 380 customers in 85 countries, who between them serve approximately 140 million pay-tv consumers through a product portfolio encompassing both traditional broadcast products and complete solutions for multi-screen TV distribution.

The deal will also help bolster Kudeslski’s pay TV revenue, which has been in decline.

In 2013 Kudelski reported pay TV-related revenue of $695m, down 4.4% versus 2012, including a year-on-year decline of 7.7% in Europe. In its 2013 annual report, Kudelski said that it expects weak fundamentals in Europe to continue to affect volumes in its core digital TV market. Thus the addition of Conax makes sense for Kudelski.

The deal also makes sense for Telenor, which says that despite “a strong track record of international growth and high profitability, achieving global scale and enhancing market share will be key determinants of future success” in the highly competitive conditional access business. Therefore Telenor has decided “the best way forward for Conax is with a new owner.”

Telenor says selling Conax “marks an important step for Telenor Broadcast in pursuing its stated strategy of focusing on its core activities within the Telenor Group.” One of Telenor’s core businesses, Canal Digital, will remain a Conax/Kudelski customer after the transaction.

UK-based Vislink plc, which owns the Advent, Link, MRC and Gigawave brands, announced that it will acquire Amplifier Technology, a provider of RF amplifiers and jammers for the defense and surveillance market, for up to £4.0m ($6.2m) in cash.

Vislink says that Amplifier’s products will be incorporated into its MAG (military and government) business unit, which caters to homeland security and defense clients.

Under the terms of the deal, Vislink will pay £2m at the close of the acquisition, and an earn-out of up to an additional £2m if Amplifier achieves EBITDA of £3m for the year ending 30 June 2014. In order that any earn out is paid, Amplifier Technology must reach a minimum EBITDA of £1m.

According to Vislink, Amplifier “has been consistently profitable over the past three years and in the year ending 30 June 2012 revenues were £4.8m with adjusted EBITDA of £1.1m.”

Ericsson announced that it is purchasing Red Bee Media from Macquarie Advanced Investment Partners, L.P.

Financial terms were not disclosed.

Headquartered in the UK, RedBee is a leading provider of broadcast playout and subtitling services. It was created when the former BBC Broadcast Limited was acquired by Macquarie in 2005 for approximately $260m. The company has approximately 1,500 employees, as well as media services and operations facilities in the UK, France, Germany, Spain and Australia.

Red Bee had revenue of approximately $250m in 2008-9, according to published reports.

In its announcement, Ericsson said the deal will further expand its capabilities in the TV industry, and highlighted the fact that it can bring enhanced efficiency into the business operations of regional and global broadcasters.

This is could be a good move. Our broadcast industry market research shows that increased efficiency is not only one of the key business concerns of broadcasters and media companies, it is also a key driver of purchasing decisions for many broadcast technology end-users world-wide.

According to Ericsson, the TV and Media industry is “undergoing an unprecedented transformation driven by consumers’ appetite for rich, interactive, anytime, anywhere entertainment. The confluence of communications, broadband and media technologies and the use of IP and mobile networks to generate and deliver such experiences is creating new opportunities in the ecosystem.”

The company has said that its strategy is “to grow in the broadcast services market and take advantage of its technology and services leadership to help broadcasters and content owners address the convergence of video and mobility.”

By assembling a portfolio of managed service providers and highlighting efficient monetization of TV content, Ericsson appears to be in the process of creating an integrated provider that can help broadcasters and media companies manage the complexities of television playout and asset monetization for both linear and multi-platform content.

“Ericsson is making a step change to our business, cementing our commitment to TV and broadcast services and continuing a journey we started in 2007,” says Magnus Mandersson, Executive Vice President and Head of Business Unit Global Services, Ericsson. “We can create value for broadcasters by making digital content more accessible, enabling monetization of TV content more efficiently.”

Ericsson says that after the deal closes, Red Bee will be incorporated into Ericsson’s Global Services business unit, and the UK will become a global media hub for Ericsson. The company will have more than 4,000 employees based in the UK, with more than one-third working in the media services business.

The closing of the acquisition is subject to approval from relevant regulatory authorities and other contractual conditions.

Chyron announced that it has signed a definitive agreement to acquire Stockholm-based Hego Group, a provider of graphics and data visualization solutions for TV and sports, in an all-stock deal.

The company’s referred to the deal as a merger in its press release, and announced that it will rename the combined company ChyronHego.

Hego Group chairman and CEO Johan Apel, will become president and COO of ChyronHego, and will also get a seat on the company’s board of directors. . Michael Wellesley-Wesley, president and CEO of Chyron, will remain as ChyronHego CEO.

All Stock Deal with Three-Year Earn-Out

Under the terms of the deal, Chyron will issue a number of shares of Chyron common stock which will represent 40% of its aggregate shares of common stock outstanding, including certain outstanding options, after the closing, in exchange for all of Hego’s outstanding capital stock.

The deal also includes an earn-out provision whereby Hego shareholders will be entitled to receive additional shares of Chyron stock (up to a total of 50% of the aggregate shares outstanding) for achievement of certain revenue milestones during 2013, 2014 and/or 2015.

Combined Company Financials

Hego, which has about 100 employees, had revenue of $14.8m in 2012, up 37 percent from 2011. Hego posted an operating profit of $1.6m in 2012.

This implies the total 2012 performance of the enlarged company was revenue of approximately $45m, and an operating loss of $2.1m.

“The merger of Chyron and Hego brings together two pioneering companies to create a global leader in broadcast graphics creation, playout, and real-time data visualization. This is a truly transformative transaction for Chyron,” said Michael Wellesley-Wesley. “By combining the teams and resources of Chyron and Hego, we will deliver to our customers a highly diverse and compelling broadcast graphics capability.”

“With this merger, we are looking forward to integrating Hego and Chyron solutions and working together to innovate new products and services,” stated Johan Apel, chairman and CEO of Hego Group. “Our objective is to develop powerful, easy-to-use solutions for sports, news and live TV. Hego has grown quickly over the last few years but this merger takes us to a whole new level, especially in North and South America where our offerings have been generating significant interest. We’re excited about this combined company and I believe that our customers are the real beneficiaries.”

Harmonic announced today it has reached an agreement to sell its cable access business to Aurora Networks $46m in cash. The deal is expected to close by the end of the first quarter of 2013.

The company said it expects to net approximately $35m from the transaction after tax. All proceeds from the sale will be used to repurchase shares, in support of the company’s ongoing efforts to review its capital structure and to deliver value to all its stockholders,

Cable access products, which includes optical transmitters, amplifiers, receivers and nodes, generated $52.9m in sales for Harmonic in 2012, approximately 10 percent of the company’s overall revenue $530.5m in 2012.

However the gross margins for the cable access product portfolio was only 30% in 2012, compared to GAAP gross margins of 49% for the Harmonic’s business as a whole in 2012.

Harmonic admits that it is “not a leader in the cable access product area”, and that there is “limited strategic synergy between cable access and the company`s other higher growth product lines.” The company says that its decision to divest its cable access business “reflects its commitment to the video production and playout, video processing, and cable edge product areas, where it currently holds market share leadership.”

“The sale of the Cable Access business enables us to sharpen our focus on our largest growth opportunities,” said Harmonic CEO Patrick Harshman. “Cable Access was Harmonic`s lowest margin product line, and through this transaction and the increase in our authorized share repurchase program, we will continue to drive growth in our core markets, expand our gross margin, reduce our outstanding shares, and position our business for stronger long-term earnings.”

Revised Guidance:

The company has issued revised financial guidance as a result of the sale of its cable access product line.

Harmonic says it now expects net revenue in the first quarter of 2013 to be in the range of $100m to $110m, down from $115m to $125m. Gross margins for the first quarter of 2013 are now expected to be in the range of 51.5% to 52.5%, up from the 49% to 50% guidance issued previously.

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Related Content:

Press Release: Harmonic to Sell Cable Access Business to Aurora Networks for $46 million

Advertising and content delivery specialist DG announced that a “special committee” of the company’s board of directors has completed its review of strategic alternatives for the company.

DG says that following the six months review, the committee is “not recommending any transaction or other strategic alternative” be taken by the company.

Since being formed in August 2012, the “special committee” has explored numerous strategic alternatives available to the DG, including a sale of all or parts of the business, a spin-off and split-off of parts of the business, capital structure alternatives, and potential merger combinations. As part of its active review, the committee and its financial advisor, Goldman Sachs, engaged with over 45 potential financial and strategic partners (including competitors) to determine their levels of interest in a strategic transaction involving the Company. None of the parties contacted presented a definitive transaction.

DG says that following this process, the Special Committee has advised the company’s board of directors that “its review of strategic alternatives has concluded,” and that “substantial benefit was derived from the strategic alternatives process and [the committee] will advise the board on potential actions to enhance the value of our business for our shareholders.”

The Walt Disney Company said that it has agreed to acquire Lucasfilm Ltd. for $4.05 Billion in a stock and cash transaction from George Lucas, who owns 100% of the business.

Under the terms of the deal, Disney will pay Lucas approximately half of the purchase price in cash, and the remainder via approximately 40 million shares of Disney stock.

At the close of the transaction Disney will acquire ownership of Lucasfilm, including its popular Star Wars franchise, as well as Lucasfilm’s operating businesses in live action film production, consumer products, animation, visual effects, and audio post production.

Disney will also acquire the substantial portfolio of cutting-edge entertainment technologies that are owned by various Lucasfilm companies including Lucasfilm Ltd., LucasArts, Industrial Light & Magic, and Skywalker Sound. Disney says its present intention is for Lucasfilm employees to remain in their current locations.

Disney likened the Lucasfilm deal to its earlier acquisitions of Pixar and Marvel, which it said has enabled it to “create maximum value” through the use of innovative technology and multiplatform distribution on a truly global basis.

The two companies have a long-standing relationship between them that includes successful integration of Star Wars content into Disney theme parks in Anaheim, Orlando, Paris and Tokyo. Following on from this deal, it’s likely the relationship will be expanded greatly. Disney said that Star WarsEpisode 7 is targeted for release in 2015, with more feature films expected to continue the Star Wars saga and grow the franchise well into the future.

“This transaction combines a world-class portfolio of content including Star Wars, one of the greatest family entertainment franchises of all time, with Disney’s unique and unparalleled creativity across multiple platforms, businesses, and markets to generate sustained growth and drive significant long-term value,” said Robert Iger, Chairman & CEO of The Walt Disney Company

The Boards of Directors of Disney and Lucasfilm have approved the transaction, which is subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act, certain non-United States merger control regulations, and other customary closing conditions. The agreement has been approved by the sole shareholder of Lucasfilm.